Prior week summary
The major U.S. equity indices fell last week, capping an end to their worst quarterly performance since 2008, as renewed fears of a prolonged economic disruption weighed on investor sentiment despite reports of a possible “phase four” spending bill on the horizon. The global infection toll passed 1,000,000 infections with the U.S. accounting for nearly a quarter of all cases. As of Sunday evening, the U.S. infection count stands at over 330,000 cases with New York leading domestic cases. As the infection count continues to increase, the Centers for Disease Control and Prevention (CDC) recommended this week that Americans wear a mask when out in public but took care to note that medical-grade masks should still be saved for medical professionals saying, “The cloth face coverings are not surgical masks or N95 respirators. Those are critical supplies that must continue to be reserved for healthcare workers and other medical first responders.” On Capitol Hill, the makings of a “phase four” federal spending bill are beginning to take shape. Speaking on the bill on Friday, Speaker of the House of Representatives Nancy Pelosi said, “Let’s do the same bill we just did, make some changes to make it current,” and noted, “While I’m very much in favor of doing things we need to do to meet the needs — clean water, more broadband, the rest of that — that may have to be for a bill beyond that right now.”
The unprecedented lockdowns across the U.S. continued for another week with 38 states now limiting commerce to essential businesses, and the strict measures are beginning to show up in the economic data. Jobless claims skyrocketed last week, shattering the prior week’s record-setting figure, with over 6.6 million Americans filing for unemployment. The two-week total now stands at nearly 10 million jobless claims showcasing the significant economic toll that accompanies strict limits to activity in an attempt to slow the spread of the virus. Friday’s print of the March non-farm payroll report indicated that the U.S. economy shed 701,000 jobs over the month, smashing expectations for 100,000 job losses. While the figure was much worse than expected, analysts warn that the April report will likely show an even more dismal reading as this month’s data collection window closed prior to the massive increases in jobless claims over the past two weeks. On the manufacturing front, the major releases for the week painted a contractionary picture. The ISM Manufacturing index fell to 49.1 for March, falling into contractionary territory and below the 50.1 reading from February. Additionally, the Chicago manufacturing PMI fell to 47.8 in March, down from 49.0 in February, and the IHS Markit Manufacturing PMI fell to 48.5, down from last month’s reading of 49.2.
The look forward
In a light week for economic data, market participants will be awaiting updated inflation data in the form of the Producer Price Index and the Consumer Price Index. Updated figures on jobless claims, consumer sentiment, and wholesale inventories also dot the economic calendar. The Federal Reserve will release the minutes of last month’s emergency meeting on Wednesday.
Market implied policy path (Overnight indexed swap rates)
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